Transcription
Hey everyone, and thanks for jumping back into the cryptoverse. Today, we're going to talk about the Ethereum valuation against Bitcoin. If you guys like the content, make sure you subscribe to the channel, give the video a thumbs up, and also check out the sale on Into the Cryptoverse Premium at into the cryptoverse.com. Let's go ahead and jump in.
So, what I'd like to do in this video is just spend most of the time talking about the ETH/Bitcoin valuation. And of course, to do that, we need to first sort of set our thesis for it, right? So, the general assessment, uh, way back in the day, right, 2022, 2021, was that we would see this collapse by the ETH/Bitcoin valuation. Now, one of the reasons for this is because when you have tighter monetary policy, uh, in general, whether it be quantitative tightening or higher interest rates, you tend to see higher risk assets bleed to lower risk assets, right? Like, that makes sense fundamentally. And it's true that the collective altcoin market, in my opinion, is still likely bleeding to Bitcoin. I think that the current altcoin rotation where money's flowing into altcoins from Bitcoin could last a few more weeks, but I do think that by the end of August, we'll likely see that money flow back into Bitcoin. And I think that'll lead to the collective altcoin market going lower on its Bitcoin pairs.
However, there's another thing that's true as well, and that's that any individual altcoin can bottom against Bitcoin at any point in the cycle, right? So, we've seen other cryptocurrencies bottom against Bitcoin sooner in the cycle. Uh, Solana was an example of that. If you look at the SOL/Bitcoin pair, you'll see that it found its low over here in 2022 and 2023. If you look at the XRP/Bitcoin valuation, you'll see that it found these lows over here in late 2024, sort of like a kind of like a double bottom setup, which historically leads to, you know, to some nice rallies. And so, while it's true that the collective altcoin market, in my opinion, will likely eventually head to the range lows of 0.25, it's also likely though that for this cycle, there's a good chance that the ETH valuation has bottomed against Bitcoin, right? Like, there's a good chance that it has actually bottomed against Bitcoin, even though I think that the collective altcoin market could very well eventually go lower against Bitcoin.
And one of the reasons why I think that there's a good, there's really, there's a few different reasons why I think that the ETH valuation against Bitcoin is likely the low, I think is likely in. One of the reasons, uh, is simply looking, and this is not really the main reason. It's more of like just a confluence type reason. But one of the reasons is just that ETH dominance basically went to the same level it went to the last cycle when it bottomed. And it, there's a chance, right, that it's just sort of moving between these two extremes. And so when I look at a chart like this, you know, it, it makes me think that, all right, well, it seems like at least for this cycle, the low for the ETH/Bitcoin valuation is probably in right now. I could be wrong, but that's at least what I think.
Um, but the real reason as to why I think that ETH has bottomed against Bitcoin is, and I know a lot of people already know what I'm going to say, but I'm going to say it anyways, is because when ETH goes home, that's normally when the ETH valuation bottoms against Bitcoin. So, if we go back and look at just simply the last couple of cycles, what you'll notice, this is ETH/USD. What you'll notice is if you overlay the ETH/Bitcoin valuation onto this chart and you just kind of find the low for ETH/Bitcoin, you'll notice that it occurs when ETH/USD drops into the lower logarithmic regression trend line, right? That's when the low actually occurs, right? And so last cycle, we had a double bottom on the ETH/Bitcoin valuation, and the cycle before it was more or less just a single low. But you can see that the lows actually occurred for that cycle when ETH/USD went home.
Now, of course, there's always a risk that Ethereum could drop back into the regression band, and there's always a risk that ETH/Bitcoin could drop back down like last cycle. It's not impossible for something like that to happen, but I at least think for this cycle, considering that if the four-year cycle does remain intact, then it likely only means there's like five more months, five to six more months left anyways of the current cycle. And if that's the case, it just seems like there's a good chance that the low for ETH against Bitcoin is in for this cycle, right? Because you can see once again, when ETH/USD broke down and went home, that's when ETH/Bitcoin found that low. And so when I look at a chart like this, it just, it makes me think there's a good chance, a high probability. There's no such thing as a sure thing, but it makes me think there's a high chance that ETH has in fact bottomed against Bitcoin.
The one thing I will say though is that because I think that all Bitcoin pairs will eventually go lower, I think that there will be, you know, that there's going to be some pullbacks on the ETH/Bitcoin valuation. For instance, if you were to simply look at Total 3 divided by Bitcoin and you were to just overlay it on this chart, and we'll set this to a new scale. Um, one of the things you'll notice is that ETH/Bitcoin set a higher low, while altcoin pairs set lower lows, right? So, if you're thinking the way I'm thinking, right, if altcoin pairs still need to go lower once we potentially get a rotation back to Bitcoin starting about late August, if altcoin pairs need to go lower, then it would suggest that ETH/Bitcoin would likely get a pullback at some point, maybe about late August going into September, and then that could lead that pullback into a higher low for ETH/Bitcoin could then lead to a lower low for altcoin pairs.
And so then the question, of course, is, well, you know, notwithstanding potential pullbacks by the ETH/Bitcoin valuation, and you can even see like last cycle, um, there certainly were, uh, no shortage of pullbacks for the ETH/Bitcoin valuation. Like, we had plenty of them. And even the cycle before that, we had more explosive rallies. But even in the more explosive rally, you still had occasional pullbacks by the ETH/Bitcoin valuation, right? Like, it would go up for a few weeks and then it would stall out for a while before potentially going up again. And so with that in mind, it kind of raises the question, well, how high could the ETH/Bitcoin valuation go, right, this cycle? And the short answer, of course, is no one really knows because price predictions are, you know, they usually don't actually pan out. But just to give us an idea of what happened last cycle, let's just say ETH/Bitcoin last cycle, it rallied to the 0.5.
Now, one thing I will say, and I've had this sort of view for a while, is that one idea for the ETH/Bitcoin valuation that's actually taking place is that it might actually be sort of on its own logarithmic regression curve, but it's not going to just increase forever. It could just be converging to whatever that fair value is. And so you have a series of higher lows, but you also have a series of lower highs. And so what I found is that when we were in the downturn part, a lot of people told me I was wrong about the devaluation of Ethereum against Bitcoin because they're like, "Well, you're ignoring the higher lows." But I wasn't, right? I was saying, "No, I agree with the higher lows, but there's also lower highs, right? And it doesn't make sense to ignore the lower highs just because you want to look at the higher lows." But now I think, hey, look, until the higher low structure is broken, I'm going to run with it. Now, it's possible that at some point the higher low structure is broken. And if that happens, of course, that will have probably very negative implications, but that hasn't happened. And I don't think there's a really high chance that it will happen, at least this cycle.
So, in this case, if ETH/Bitcoin has bottomed and this is the low, but we also can see that there's lower highs, right? There's also lower highs. And so one of the things to consider is that last cycle, ETH/Bitcoin rallied to the 0.5 fib retracement, right? And a lot of times when we, you know, when I think about this stuff, I think like, if it's not broke, don't fix it. And one of the things that we followed for a long time with Bitcoin dominance, I'm sure many people remember, was the assessment that, hey, it was likely going to go to 60%. And one of the reasons we said 60% all those years ago was because last cycle it rallied to the 618, and I said, look, guys, a conservative target for Bitcoin dominance is the 618. Now, ultimately, it did go higher than that, and we called for it to go to 66% because when it went to the 618 and it only went to 60%, we saw that altcoin pairs were still at 0.35, not 0.25, which is the range lows. And so because altcoin pairs were not actually at the range lows, it made sense to say, hey, 60% might be the top for a while, but we're actually likely going to go up to the 786 now, which would correspond to 66%. And then Bitcoin dominance went to 66%, and we've had a pullback here. And you can also see that it's trying to find support exactly at the 618. So, just because it topped at the 618 last cycle did not mean that dominance had to top at the 618 the following cycle. It went, it ultimately went higher, but there still was a pretty big pullback at the 618.
So, when I say things like, hey, look, last cycle ETH/Bitcoin went to the 0.5, that doesn't necessarily mean that it has to make it there. It also doesn't mean that once it makes it there, it can't go higher. But if we were to take that and say, well, what would that put the valuation of Ethereum on its Bitcoin pair? If we were to take the fib retracement tool from this cycle, we can see that we're actually coming up on the 236, which corresponds to about 0.034. The next level is. So, these are the levels that I'm looking at, right? So, you have the 0.03, you have 0.034. The next level, the 382 corresponds to 0.044. The next level is the 0.5, which again, last cycle is where ETH/Bitcoin rallied, and that's actually at 0.053. 0.053. The reason why that's interesting, the reason why 0.053 is interesting is because that's basically where it bottomed out at when it had that big drop in the summer of 2022 before the rally into the Merge. Right now, that rally that Ethereum had into the Merge against Bitcoin caught a lot of people off sides when they thought it was going to go higher.
The, the, this rally right here actually caught me off sides because I was just under the assumption it was going to keep going down immediately, right? Like, I traded a lot of my ETH to Bitcoin right there in April of 2022 or thereabouts at around 0.075, and then again later at 0.08. But when I first made the trade, it was actually at 0.0749. And then I watched ETH/Bitcoin drop down here, and I thought I was a genius. And then the market humbled me like it frequently does, and it went back up. And then I used that opportunity to sell more ETH to Bitcoin at around 0.08. So, I got another exit on it. Um, but it allowed me to just kind of DCA out of Ethereum into Bitcoin back then, mostly between 0.0749 and like 0.082, right? It just made it easy. That rally caught me off sides. Like, I wasn't expecting it. I just thought we were already in the downturn. Uh, it did happen. It was just a lower high, and then ultimately, you can see what eventually happened.
So, when I look at this chart, I think of these fib levels potentially as the key resistance levels to watch. I am hopeful that it can ultimately break through the 0.034. I don't even know that last cycle that provided, you know, any resistance at all. Right? I mean, I don't, yeah, I mean, you can see the 236 ETH/Bitcoin just went right through it. But if there is, if there is any resistance here at the 0.034, or if it comes at the 0.044, or sorry, at the 0.03, the 38, I'm mixing up the ETH/Bitcoin valuations and the fib levels, but if it, if there is any resistance at these fib levels and you see these pullbacks by ETH/Bitcoin, I think what would be accomplished during that pullback would be allowing altcoin pairs to sort of go to those range lows. Right? Again, there's no guarantee that I'm right about that, but you can see that when ETH/Bitcoin does bottom, like it did last cycle, it doesn't just go straight up. It gets these periods where it pulls back. And I think that if that happens, I think that alts are going to bleed back to Bitcoin during that time. Now, of course, the cycle before it had a more explosive rally up, but it still had these downturns, right? And so, I think that is something to at least think about with altcoins.
The other thing that you I think have to think about with altcoins is that a lot of people have disagreed with me for a long time about altcoin pairs going to the range lows, right? And, you know, I have been on the right side of the altcoin pair trade for years, for years. And naturally, every time there's a rally by altcoin pairs, you know, a lot of people say, "Well, you're missing out on alt season," and whatnot. But I would contend, I would contend that it doesn't even matter. Like, this chart to me right now isn't as relevant as it used to be. I still think they will go down here, right? I want to be clear. I'm not backing down from that. I think that is the most likely outcome. But what I will say is that I think that it doesn't even matter as much right now because even if they do, and I've said before, I mean, they could go as high as 0.55, which is where they went in August of 2017 before dropping down to the range lows of 0.25, right? Like, that's still possible. So, I would say they could still go up there potentially and still come down to the range lows. If they do go above this level, the reason why I still am not that concerned about it is because even if they do start outperforming Bitcoin, they're still bleeding to Ethereum, right? Like, they're down, you know, altcoins are down 42, 43% against Ethereum since Ethereum went home. So, it's, it's the same thing we talked about with Bitcoin dominance, right? Like, a lot of people bought altcoins instead of Bitcoin thinking that their altcoins were going to outperform Bitcoin. And I'm sure those people, altcoins did, but for everyone else, those altcoins underperformed Bitcoin, and they would have been better off with Bitcoin.
Now, you could say the same thing about Ethereum. Right now, a lot of people keep chasing altcoins, but Ethereum's outperforming the collective altcoin market. I can't tell you how many people I've seen on YouTube say, "I wish I'd listened about Bitcoin dominance in 2022." But now I'm starting to see a lot of people say, "Well, you're wrong about, you know, this drop by Ethereum." I think a lot of people are going to end up making the same mistake, and I think they're going to keep chasing altcoins when there's a good chance that Ethereum would actually give them better risk-adjusted returns than those altcoins. I still think that Bitcoin is better than Ethereum. And I do think that it's, I think that ETH/Bitcoin, you know, is putting in lower highs. Like, I don't think it's going to put in higher highs. I still think Bitcoin is the better asset. But to be objective is important, right? It's important to be objective about markets and say, look, you know, people just spent years calling me a Bitcoin maxi. And honestly, it's not the insult they think it is. But while they said that, it was not wrong to be bearish on the ETH/Bitcoin valuation until Ethereum went home. But since it has gone home, I think it makes sense to be bullish on the ETH/Bitcoin valuation, being aware that there likely will be a couple of pullbacks here and there that will then likely send altcoin pairs a little bit lower and a little bit lower.
Okay, so I think you just have to be aware of that. Um, and things can make a lot of sense. But, you know, I don't know exactly how high ETH/Bitcoin can go this cycle, but to just give you an idea, last cycle it rallied to the 0.5 fib. And so you could argue that if all Ethereum is doing on its Bitcoin pair is just kind of, you know, getting these like echo bounces back up, last cycle it went to the 0.5. If it does go to the 0.5 fib this cycle, that would correspond to about 0.053. 0.053, which would also correspond to the low back in the summer of 2022. That low, by the way, of 0.053 also was a level. It was a level that Ethereum kind of bounced around for many months, you know, before ultimately giving it up. Um, and that was the level that it held as support again back in the summer of 2022 with that pre-Merge rally. I don't know if I said 2023 earlier, but it was the summer of 2022. You had that pre-Merge rally. That's where it ultimately found support, at least on the weekly time frame. Like, obviously, there was a wick lower down to 0.049, but if you look at sort of a line chart, you can see that it more or less bottomed around 0.053 on that drop, which would correspond to the 0.5 fib retracement level.
If you look at the ETH/Bitcoin market cap ratio, sometimes I think this might be a little bit more useful in trying to figure out like when pullbacks might be. But, you know, at least last cycle, you can see the main pullbacks occurred at that level on the ETH/Bitcoin pair, and then at that one, and then kind of around here, right? There was a wick higher. But these are kind of the levels that Ethereum stalled out at before dropping. And so, you know, maybe it's worthwhile to watch those. Like, if ETH/Bitcoin market cap ratio is pushing 223 and it starts to roll over, that might just be, you know, sort of the seasonal rollover of altcoin pairs come late August going into September, October timeframe. Uh, so just be aware of that.
So, you know, that's generally my assessment on the ETH/Bitcoin pair. I, I think it makes sense to, to generally, in my mind, it makes sense to assume that the ETH, the ETH/Bitcoin valuation will go higher for the remainder of this cycle. And there's going to be like one more pullback. There could be two. Uh, but I, I think really you're probably going to see like at least one more pullback just to allow altcoins to go to where they need to go on their Bitcoin pairs. I know a lot of people don't like that. But a couple things to think about. The ETH/Bitcoin market cap ratio, when I first started tweeting about it and making videos about it, uh, you know, way back when, but when I first started really turning bearish on it in 2022, um, you know, a lot of people said that the market cap ratio would never come back down here to the range lows, and it did, right? It did, despite them not thinking it would. You know, I think, you know, if you look at Bitcoin dominance plus ETH dominance plus USDT dominance plus USDC dominance, you basically see that it oscillates between around, you know, 62% all the way up to around 82% or so, give or take, right? But the high tends to be about 82%.
But the point, uh, that I want to make is if you take, you know, if you just sort of look at it in reverse, if you take a 100 minus that, to me it seems likely that, you know, this, or sorry, I need to, I need to subtract out all these because now we're adding in these, right? So, let's, we're subtracting out Bitcoin dominance, we're then going to subtract out ETH dominance, USDT dominance, and of course, USDC dominance. So, we've got, we've got 100 minus Bitcoin dominance, minus ETH dominance, minus USDT dominance, minus USDC dominance. We look at that. One of the things you'll notice is that it topped out at around 36%. And then it bottoms out, right? I mean, over here in 2020, it went all the way down to 17, right? So, it has, it last cycle it went down as low as that. Now, the first low in September of 2019 of this metric was around that same level. However, the reason why I feel I think there's going to be another, an eventual another drop by it is because I think there will be sort of this surge mostly into what I call the blue chips, right? Like Bitcoin and Ethereum. And you can see that would be this drop, right? That drop right there. I'm not saying it has to go that low, but to me, it would make sense for it to just kind of pull it down a little bit lower. Kind of like, you know, you can see here it went a little bit lower, and then here it went a little bit lower. Um, eventually it fell below this 17% level. And so I kind of think that's the most likely outcome. You can even see that the current rally that this has is right up to the same level it rallied to right there in November of 2020 before that final drop.
And the other thing to think about is if you look at Bitcoin dominance plus ETH dominance again, you could look at this and say, well, what if it's an oscillator, right? And what if it simply tops out? What if it just simply tops out at the same level it topped out the last couple of cycles, of around 85%? Right now, it's around 73%. I know that might sound crazy, but listen, guys, a lot of people this cycle would have just been better off assuming that everything was going to stay the same, right? That, you know, that ETH would bleed against Bitcoin until Ethereum went home. They would have been better off believing that Ethereum was actually going to go home, that I wasn't just blowing smoke thinking it was going to happen. They would have been better off assuming that alts would bleed against Bitcoin and that Bitcoin dominance was going to go higher. And they would have been better off just assuming all of that stuff, that why should this time be different? And so when I look at a chart like this, I just kind of remind myself like, well, why should this time be different? You know, maybe this is where the cycle changes, but the narratives would support it as well. I generally think that narratives follow price and not the other way around, right? I think narratives follow price and not the other way around.
But with that said, you have the Bitcoin ETF and the ETH ETF, and you have the, you know, these companies with having these balance sheets of Bitcoin, and now some are coming on with ETH. You don't really see that as much yet with the altcoins. Now, maybe that comes later in the cycle, but the narrative is there for blue chip dominance to surge. For Bitcoin dominance plus Ethereum dominance, the narrative is there, I think, for it to surge. And if it does, imagine, you know, what it would look like if it does go back up to 85%. You might not like it, but remember, in order to get where, in order to get what you want, sometimes you have to go where you don't want to go. I told this to the ETH maxis not that long ago. I'm sure many of them remember what I said back then about ETH/Bitcoin. Do you guys remember what I said? What did I say about ETH/Bitcoin? I said, in order for ETH/Bitcoin to bottom, ETH/USD has to go where the ETH maxis don't want it to go. And that was the lower logarithmic regression trend line, right? The regression trend line all the way down here. Now, since it went there, I think ETH/Bitcoin is likely bottom, but I don't know that you can say the same thing about the Bitcoin market.
So, when I look at this, I think there's a good chance it will eventually come back down here. Admittedly, again, if you look at 100 minus Bitcoin dominance, minus ETH dominance, minus USDC dominance, minus USDT dominance, you can see that one of the levels that it found support at last cycle is around where it's finding support now, but eventually it did break, right? Like, eventually it did start to go below it on some wicks, and then eventually it fell all the way down to about 10%, which is around half of where it is right now. So, you know, that's at least the way I'm looking at this. And again, if my assessment is wrong about altcoin pairs right now, I'm still comfortable with it because they're just bleeding to Ethereum, right? Like, the Ethereum that I picked up when Ethereum went home is outperforming the collective altcoin market. So, in my mind, maybe it's cope, right? It could be coping, but in my mind, I think, well, you know, I'm not really missing out on altcoins because the money I put into Ethereum is outperforming most of them. And had I put some of that money into alts instead of Ethereum, there's a higher probability that I would actually be underperforming a lower risk asset in Ethereum. That's the reason why. Now, again, maybe it's coping. You tell me. But to me, it still looks like ETH is outperforming the altcoin market, and I think it's likely going to continue to do that.
Those are my general views for right now. Uh, I'll let you guys know if that changes. Make sure you guys subscribe, give the video a thumbs up, and again, check out the sale on Into the Cryptoverse Premium at into the cryptoverse.com. I'll see you guys next time. Bye.